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Read comments (5)Recently, someone wrote on the Democrat-News Web site's Speak Out section that ethanol was the reason that food prices have risen.
Well, as an agriculture writer and family farmer I was unable to let that misinformation be the last word on "my" own website.
So, in the longest post in Speak Out history I used research to explain why the often-quoted mistruth was wrong. I apparently shut down the debate and was fearful for a while no one would ever post on Speak Out again.
Talk about being ignored.
As my editor said, maybe it would be best to use my column for such (long-winded) arguments. (He didn't actually say "long-winded.")
But anyway, I took the advice.
Ethanol is not to blame for higher food prices. I repeat: Ethanol is not to blame for higher food prices.
High energy prices, a weak dollar and increased demand overseas are actually the main culprits. In fact, many think ethanol and bio-diesel could be used to lower food prices.
"Energy is required to produce, process, package and ship each food item. While it may be more sensational to lay the blame for rising food costs on corn prices, the facts don't support that conclusion. By a factor of two to one, energy prices are the chief factor determining what American families pay at the grocery story," according to John Urbanchuk of LECG, LLC.
In fact, a Consumer Federation of America report criticized the oil industry for failing to use ethanol as a way to increase supplies of refined gasoline. The study notes that the use of ethanol could actually help reduce food price increases. "Higher energy prices cause higher food prices," says CFA director of research Marc Cooper.
Speakers at the local KMMO Ag Day last week reiterated that point. Dale Ludwig, executive director of the Missouri Soybean Association, stated that by using ethanol and bio-diesel to increase our gasoline supply, we could actually lower gasoline prices -- and food prices.
There is no doubt that crop prices have gone "nuts" (for lack of a better term) this winter. So people who don't know very much about markets have reported that ethanol must be the reason.
But they should look a little deeper.
The value of the U.S. dollar is down worldwide and incomes for countries such as India and China are rising. As they become more middle class they want to eat more proteins. Those two things have combined to make our exports increase day after day.
Dairy products are one of the products that are getting more expensive at the grocery store and studies show that is directly related to world demand.
Of course, it's easy to think that with the wild commodity prices, farmers must be really happy. You would think so wouldn't you? After all, in the 23 years we have been farming we have had prices over $2 for corn and $6 for beans, maybe four times. Two of those have been in the last two years.
To be quite honest, last year it was fun! As we traveled to watch the University of Missouri-Columbia's football team play in the Cotton Bowl (we won!) with some other farm couples, we even joked that without $4 corn, we would never have been there.
We figured it was like the other two "high" years, we'd have a good year and then prices would go down and back to "normal."
But this year, it is just plain nerve-wracking. What isn't widely reported is that our inputs -- fertilizer, fuel, feed, herbicides, and seed have increased up to 100 percent in the last year.
And as farmers we never forget, "What goes up must go down." It always does.
Well, except our costs -- they seldom go down.
In fact, speakers at the local Ag day said that if corn goes down to $2 again, many farmers would go out of business because of the high cost of inputs. Those are scary words. After all, like I said, $2 corn (and lower) is basically all we've ever known.
But I think the main thing people who aren't involved in farming really should know is that despite everything you may hear, the truth is these two things:
Family farmers only get 19 cents on every dollar you spend on food; the rest goes to transportation, marketing, etc. (i.e. the "middle man"). But despite that and even with some prices rising, Americans still pay less than 9 percent of their disposable income on food.
That is less than any other country. A lot less!
Canadians spend 14 percent and in England over 18 percent is spent on food. In Mexico, over 25 percent of the disposable income is spent on food.
Food vs. fuel. The Great Debate? I don't think so.
Taking into account the energy required to grow the corn and convert it into ethanol, it has been determined that burning the biofuel as a gasoline additive actually results in a net energy loss of 65 percent and in all likelihood, much more. Corn is not 'free energy'. The cumulative energy consumed in corn farming and ethanol production is six times greater than what the end product provides your car engine in terms of power.
If ethanol is as much of an environmental Trojan horse as the data suggests, what is the solution? Some researchers see several possibilities, all of which can be explored in tandem. First, is to divert funds earmarked for ethanol to improve the efficiency of fuel cells and hybrid electric cars. (Adapted from materials provided by University Of California - Berkeley;http://www.sciencedaily.com/releases/2005/03/050329132436.htm)
"Abusing our precious croplands to grow corn for an energy-inefficient process that yields low-grade automobile fuel amounts to unsustainable, subsidized food burning...." says Cornell professor David Pimentel (College of Agriculture and Life Sciences). Pimentel, who chaired a U.S. Department of Energy panel that investigated the energetics, economics and environmental aspects of ethanol production several years ago, subsequently conducted a detailed analysis of the corn-to-car fuel process.
"Corn production in the U.S. erodes soil about 12 times faster than the soil can be reformed, and irrigating corn mines groundwater 25 percent faster than the natural recharge rate of ground water. The environmental system in which corn is being produced is being rapidly degraded. Corn should not be considered a renewable resource for ethanol energy production, especially when human food is being converted into ethanol".
o The approximately $1 billion a year in current federal and state subsidies (mainly to large corporations) for ethanol production are not the only costs to consumers, the Cornell scientist observes. Subsidized corn results in higher prices for meat, milk and eggs because about 70 percent of corn grain is fed to livestock and poultry in the United States Increasing ethanol production would further inflate corn prices, Pimentel says, noting: "In addition to paying tax dollars for ethanol subsidies, consumers would be paying significantly higher food prices in the marketplace." (data taken from http://www.sciencedaily.com/releases/2001/08/01080...
Corn ethanol subsidies totaled $7.0 billion in 2006 for 4.9 billion gallons of ethanol. That's $1.45 per gallon of ethanol (and $2.21 per gal of gas replaced).
Even with high gas prices in 2006, producing a gallon of ethanol cost 38¢ more than making gasoline with the same energy, so ethanol did need part of that subsidy. But what about the other $1.12. Not needed! So all of that became, $5.4 billion windfall of profits paid to real farmers, corporate farmers, and ethanol makers like multinational ADM. Why is it the farm states put up with this?!
Where did those subsidies come from:
1. 51¢ per gallon federal blenders credit for $2.5 billion = your tax dollars.
2. $0.9 billion in corn subsidies for ethanol corn = your tax dollars.
3. $3.6 billion extra paid at the pump. (see data from http://zfacts.com/p/63.html)
The "factor" is greed..
Its not that complicated folks..
Marcia,
I agree with most of what you are saying. I am not against alternative fuels, I just wish we would focus on the short term as well as the long term energy prices. It seems like we are in agreement. I too am from a "farm family" of sorts. I don't have much to do with the farm, but my grandparents have a farm and the jump in prices certainly has been good for them. I guess it will be good for me in the long run seeing as how my inheritance will be effected by these prices. (Ok that was bad to say, but true) I enjoyed reading your reply and thank you for replying. I am attaching a web page for you to look at about the discovery of oil. It seems they discovered it in 1999 but there was no profit to drill then. Oh and I think "big oil" made over 120 Billion dollars last year! I am not sure how many companies that includes, but I think they can afford to put more into drilling, but then again, why? They are getting rich, why dig for more? Oh well, have a nice day and I wish you and your family well with your farm!
http://www.nextenergynews.com/news1/next-energy-ne...
Dear cjay,
Thank you so much for responding. No, actually we are not investors in any ethanol (or bio-diesel) plant. We do raise corn and have delivered some corn to Mid Missouri Energy on behalf of another investor.
However, as a farm wife, farmer and mother of two boys who would like to take over the family farm someday, I can't claim I am completely unbiased when it comes to ethanol. It is another market for our product and I'm all for more markets.
As a journalist, I try very hard to remember there are two sides to every issue, and have done a lot of research on the pros and cons of ethanol. Semi-View is just my opinion and I know there are many other views out there. I do think you are completely right, we should develop many energy sources, especially domestic oil.
I also understand what you are saying about not putting some blame on ethanol. At first, when "ethanol" became the big thing, corn prices did rise, but at that time food prices didn't. It has been since the latest events, the cheap dollar, heightened demand, etc. that food prices have risen. I did read after I wrote the article that many hedge funds are now investing in corn, which has "artificially" raised crop prices. They are apparently doing that because they believe ethanol will keep prices high. (Today, I heard that hedge funds are also investing in oil, keeping those prices artificially high!!)
At the same time fuel prices and especially diesel prices have risen to $3 (gasoline) and $4 (diesel), and most everything at the store has to be "shipped" there, usually in a diesel truck. Those costs are being passed directly to consumers.
Food prices have been rising for the last 25 years, as well, even though corn was less than $2 a bushel most of the time.
I do admit, though, I am not an expert on why prices go up or down, even crop prices. I've often thought that it had a lot more to do with perception than actual supply and demand. I also don't think we can underestimate the influence of "Big Oil" companies who are doing everything they can to make ethanol look like a bad alternative. If you made $10 billion dollars, you wouldn't want to lose even $1 billion (10 percent) of it to another industry.
That being said, I agree wholeheartedly that we should do everything we can to lessen our dependence on foreign oil, including pumping oil here at home. I'm not really clear on why we aren't. It does seem foolish not to do that, and we should encourage our government to do so. I hadn't heard about the oil in North Dakota. Yes, we should use all our resources.
I don't think the government is investing everything in ethanol, but the mandates have helped the industry get in the market. Like I said, "Big Oil" is very happy with their profits and don't want to share any of it.
I don't know a farmer who would tell you that corn ethanol is the only answer to our problems. It will take a lot more than that to make us energy independent. However, cellulosic ethanol and other alternatives are still "a few years" away from being available.
In the meantime, corn ethanol is here, readily available and is lessening "some" of our dependence. It is a positive energy source: 1 input in makes 1.67 units of energy, and that is going up as technology improves. It is also a cleaner burning fuel than traditional gasoline. And the money is staying here in the United States, not going to some country that doesn't like us in the first place.
Thank you again for your comments. I really appreciate it.
Sincerely,
Marcia Gorrell
I am not here to argue about what is making the price of food increase, but I do have a question. Are you invested in ethanol? I know most "farm family's" are and are making good money from their investment. I only ask because if you are invested I understand why you would write an article about how ethanol is not to blame. I think if we all put our personal opinions aside and looked at the facts we would find that ethanol is a factor in why food prices are higher. You make a good point about exports, but to not put some blame on ethanol is foolish in my opinion. I think it is a good thing for our country to invest in alternative fuels. I just do not think the government should try to invest everything in alternative fuels now. I heard a reporton the radio that an estimated 400-500 billion barrels of oil was discovered in the North Dakota area. This is enough to support our use for 80-100 years without relying on any foreign import. I believe this oil should be pumped so that our expenses would go down and then we could work on developing a cost efficient and energy efficient fuel. I guess my point is that, if we were self reliant on oil, it would lower the cost of just about everything. This would help the economy and in turn bring in more tax dollars for the government since more people would be spending and traveling. This could help avoid a recession and give research and development time to come up with their affordable alternative fuel. These are just my thoughts. Good article though, I read the previous article and didn't believe ethanol was the only reason for inflating food prices. Oil and exports have to share the blame, but I do think ethanol is a factor as well.